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November 29, 2006

DC's Budget Deficit: That Didn't Take Long...

As the primary election campaign for the Mayor of Washington DC heated up this past spring, then-candidate (and now-mayor) Adrian Fenty took a stance that clearly separated him from the rest of the Democratic field-- he took a no-new-taxes pledge. It was a myopic, politically expedient move, from a guy who (many thought) was just saying it to differentiate himself from the rest of the Democratic candidates, and plenty of people (including Talking Taxes) said so at the time.

Funny thing, though-- Fenty won the election, so now he has to live up to this promise. And it's taken a grand total of three weeks since his election victory to show how short-sighted his stance was. A front-page story in the Washington Post this week notes that the city's latest budget projections show a $300 million shortfall over the next two years. (To put this in context, the city's total tax collections were a hair under $3 billion in FY 2006-- so we're talking about a per annum shortfall of about 5 percent of tax collections)

This doesn't mean the sky is falling, of course. Budget shortfalls happen all the time, and sometimes they can be closed quite easily. But these latest projections are a sobering reminder that you never know what's coming around the bend fiscally-- and that it's simply irresponsible for any elected official to take half of his/her fiscal policy options off the table before the next crisis emerges. Fenty's pledge may yet come back to haunt him.

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The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state - Adam Smith, An Inquiry Into The Nature and Causes of the Wealth of Nations, 1776